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The Food Price “Surge” in Perspective

Here’s some good perspective on the droughts in the USA and the impact on food prices.  There has been much said in the news regarding the potential for the food price increases to pass through to overall inflation.  American Century Investments offers a macro perspective:

“The news is full of reports about huge increases in prices for corn, wheat, and soybeans, as a result of a simultaneous, severe drought in many of the world’s food-producing regions. Despite the dramatic headlines, the reality for U.S. consumers is that the food inflation they experience is likely to be much more tame. Indeed, the USDA projects a 2-3% increase in prices for fruits and veggies next year, with beef prices expected to rise a bit faster than that. At the same time, the broadest measure of U.S. inflation at the consumer level, the consumer price index (CPI), was running at less than a 2% annual rate through June (the latest period for which data are available).

This disconnect between rising prices for food commodities and comparatively modest inflation at the consumer level point up some important considerations about inflation.”

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